EY’s Ian Meadows on a landmark year for the embracing of new technologies…
The industry faces many challenges but there are also positive signs in 2018 that the potential of technology to improve efficiencies and products is beginning to being realised.
Historically, the insurance industry has not always been an enthusiastic adopter of technology but that is changing. In 2018, we have already seen around 500 new start-ups enter insurance, particularly in Artificial Intelligence and IOT (Internet of things) to develop new sources of information new product design, improved decision-making.
An intriguing dynamic in support of these trends is the emergence in blockchain which has brought with it a renewed sense of industry collaboration and sense of market responsibility that goes hand in hand with this kind of disruptive, democratic technology.
Around $100m is thought to have been invested in blockchain in specialty (re)insurance alone – a figure which is set to rise to around $1bn according to some analysts by 2025. Some blockchain platforms (e.g. Insurwave, Blocksure, Axa’s “Fizzy”) have gone live and a number of networks (B3i, Riskblock and applications – e.g. Chain That – are among other initiatives pushing towards production for 2019.
To date, (re)insurance CEOs have been attracted by opportunities presented by blockchain – the technology is secure, decentralised and, with the use of smart contracts, can connect insurance parties across distributed networks and automate multi-party processes – and insodoing, promise to remove an estimated 5-15 percent of expenses from businesses.
Going forward, there is a far more important, strategic alignment of historical values and social responsibility emerging along with this technology, which far outweighs any tactical, individual successes:
- · It is self-evident that clients paying up to 50 percent of their premium towards the industry’s inefficiencies is unacceptable
- · The priority for a connected industry is to improve trusted data sources for better pricing and service proposition, including possible move to continuous contracts
- · The ultimate goal is to drive new business models, access to new markets, including addressing widening insurance gap and financial inclusion which will benefit all parties in the value chain
Perhaps the most striking cultural development is the renewed sense of collaboration. There is a general acceptance emerging amongst competitors, technologists and regulators, that the effective sharing ideas is a minimum requirement to find solutions across a variety of challenges: to mature the technology platforms to create connected enterprises and necessary improvements to permissioned networks and performance:
- · To evolving regulatory and compliance frameworks to support the sharing of data and legal interpretations of smart contracts
- · To understand the impacts to organisations, the current roles and future skills gaps which will need to be addressed. Change will take time, but it has started more quickly than we had anticipated. The industry now appears to be facing down the potential and impact of blockchain technologies head on and in particular how it aligns with AI, Robotics and IOT.
It may be the nature of the underpinning democratic design of blockchain technology which makes us think differently. Perhaps now, as we exit from one industrial age to another, we have emerged with a greater sense of community and can yet to find some answers to the industry’s biggest challenges.